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Risk Insider: Jack Hampton

Colleges that Don’t Adapt to Modern Needs Face Bankruptcy

By: | May 17, 2018 • 2 min read
John (Jack) Hampton is a Professor of Business at St. Peter’s University and a former Executive Director of the Risk and Insurance Management Society (RIMS). His recent book deals with risk management in higher education: "Culture, Intricacies, and Obsessions in Higher Education — Why Colleges and Universities are Struggling to Deliver the Goods." His website is www.jackhampton.com.

When I moved to Connecticut in the 1990s, I visited a factory that manufactured the PowerLock tape measure. The site was New Britain, with an official nickname “Hardware City” reflecting a history as a manufacturing center. It was the headquarters of The Stanley Works.

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Everybody was patiently waiting for the rebound of manufacturing that would bring back jobs. It never happened. New Britain would never again be the center for manufacturing hammers, screwdrivers, and the ilk.

The Connecticut refusal to acknowledge that the world had changed caused the state to linger years behind the rest of the country overcoming an economic recession. Recovery happened only when the state accepted technological and economic realities and went in new directions.

Higher education faces a similar challenge today. For the majority of colleges and universities, the traditional model is broken in at least four areas:

  • The academic culture is largely isolated from the realities faced by parents, students, politicians, and society.
  • Professors are languishing in a career field where they struggle on all sides.
  • Too many courses and teaching methods are on life support.
  • The role and value of academic research is problematic.

And according to a recent opinion piece in the New York Times, paying for a college education for many may not be a wise investment.

This is a serious risk management situation, at least as seen by Harvard professor Clayton Christensen. He predicts bankruptcy or forced merger of half of all U.S. colleges and universities in the next 10 years.

Bankruptcy just happened to Mount Ida College in Massachusetts. The former finishing school for girls founded in 1899 lost its way. It is closing and will be taken over by a public university. Some 1,500 students have to scramble to finish their degrees. Hundreds of professors and staff are losing their jobs.

Massachusetts Attorney General Maura Healey also thinks this is a serious risk management issue. She just launched an investigation into the behavior of senior administrators at Mount Ida. Did they violate fiduciary obligations when they abruptly announced the closure of the school?

For the majority of colleges and universities, the traditional model is broken in at least four areas.

The attorney general raises a serious question. Every year around the time of the RIMS annual meeting, I ask myself the same question. When will colleges and universities recognize the real risk that faces them? The answer is always the same. Not yet.

We might look to Sweet Briar College to see the future. In 2015, the all-women liberal-arts college in Virginia cited declining enrollments and “insurmountable” financial challenges as the reason it would shut down. Subsequently, more than 700 alumni rallied with current students in support of continuing operations. The Board reversed the decision and began efforts to keep the school in operation.

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Recently, Sweet Briar published details on its curricular and academic changes. It will cut in half the number of major programs and shift the curriculum to courses that better reflect student academic interests and careers. Topics will address sustainable systems, leadership, persuasion, and decision making in a data-driven world.

The actions have harsh realities. Faculty members who failed to change will lose their jobs, even as new teachers will be hired with the skills needed to fulfill adjusted learning goals.

Mount Ida and Sweet Briar bring us back to Connecticut. Are we waiting for students and parents to buy our hammers? If that is not likely, we need to change. The time is now. The place is here. The path is visible. Colleges that fail to address needed change are in mortal danger. So are many of their professors.

More from Risk & Insurance

More from Risk & Insurance

2018 Risk All Stars

Stop Mitigating Risk. Start Conquering It Like These 2018 Risk All Stars

The concept of risk mastery and ownership, as displayed by the 2018 Risk All Stars, includes not simply seeking to control outcomes but taking full responsibility for them.
By: | September 14, 2018 • 3 min read

People talk a lot about how risk managers can get a seat at the table. The discussion implies that the risk manager is an outsider, striving to get the ear or the attention of an insider, the CEO or CFO.

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But there are risk managers who go about things in a different way. And the 2018 Risk All Stars are prime examples of that.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Goodyear’s Craig Melnick had only been with the global tire maker a few months when Hurricane Harvey dumped a record amount of rainfall on Houston.

Brilliant communication between Melnick and his new teammates gave him timely and valuable updates on the condition of manufacturing locations. Melnick remained in Akron, mastering the situation by moving inventory out of the storm’s path and making sure remediation crews were lined up ahead of time to give Goodyear its best leg up once the storm passed and the flood waters receded.

Goodyear’s resiliency in the face of the storm gave it credibility when it went to the insurance markets later that year for renewals. And here is where we hear a key phrase, produced by Kevin Garvey, one of Goodyear’s brokers at Aon.

“The markets always appreciate a risk manager who demonstrates ownership,” Garvey said, in what may be something of an understatement.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Dianne Howard, a 2018 Risk All Star and the director of benefits and risk management for the Palm Beach County School District, achieved ownership of $50 million in property storm exposures for the district.

With FEMA saying it wouldn’t pay again for district storm losses it had already paid for, Howard went to the London markets and was successful in getting coverage. She also hammered out a deal in London that would partially reimburse the district if it suffered a mass shooting and needed to demolish a building, like what happened at Sandy Hook in Connecticut.

2018 Risk All Star Jim Cunningham was well-versed enough to know what traditional risk management theories would say when hospitality workers were suffering too many kitchen cuts. “Put a cut-prevention plan in place,” is the traditional wisdom.

But Cunningham, the vice president of risk management for the gaming company Pinnacle Entertainment, wasn’t satisfied with what looked to him like a Band-Aid approach.

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Instead, he used predictive analytics, depending on his own team to assemble company-specific data, to determine which safety measures should be used company wide. The result? Claims frequency at the company dropped 60 percent in the first year of his program.

Alumine Bellone, a 2018 Risk All Star and the vice president of risk management for Ardent Health Services, faced an overwhelming task: Create a uniform risk management program when her hospital group grew from 14 hospitals in three states to 31 hospitals in seven.

Bellone owned the situation by visiting each facility right before the acquisition and again right after, to make sure each caregiving population was ready to integrate into a standardized risk management system.

After consolidating insurance policies, Bellone achieved $893,000 in synergies.

In each of these cases, and in more on the following pages, we see examples of risk managers who weren’t just knocking on the door; they were owning the room. &

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Risk All Stars stand out from their peers by overcoming challenges through exceptional problem solving, creativity, clarity of vision and passion.

See the complete list of 2018 Risk All Stars.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]